Cut the red tape to help Mississippi's economy grow faster

If you are like most of us, you probably put on a few extra pounds over the holidays celebrating with friends and loved ones. But now that the season has passed, the time for New Year’s resolutions is upon us. Mississippi’s leaders should prioritize one resolution above all else in 2019: cutting red tape.

You might be surprised to learn that the Magnolia State, despite its reputation for believing in small government, has more than 117,000 “regulatory restrictions” in its state rulebook. These restrictions are instances of words like “shall,” “must” and “prohibited,” and they are a good proxy for the total number of legal mandates the state government imposes through regulations.

In a recent analysis published by Mercatus Center at George Mason University, I found that the Mississippi Administrative Code contained 9.3 million words as of mid-2018. To put that in context, a person with an ordinary pace of reading would require almost 13 weeks to read the entire code, assuming 40 hours a week spent reading.

Of course, reading and understanding are very different concepts. Understanding all these rules might take a lifetime.

Why is this important?

There is considerable evidence that regulation, especially federal regulation, slows economic growth. The main reason we don’t know more about state regulation is that so little research has been done, but that’s starting the change as new data becomes available.

One academic study estimated that U.S. federal regulation has slowed economic growth by about 2 percentage points a year on average since 1949. That means the national economy might have been 3.5 times larger by 2011 had we put a cap on regulations in 1949. And that’s not as difficult as it sounds: We could, for example, have ordered the removal of an old rule from the books each time a new one was added. That would have allowed for new regulations as the economy evolved, but also prevented the build-up of too many old rules.

A regulatory cap may sound odd, but it’s proven successful in places like Canada, a country that isn’t exactly known for light regulation. The province of British Columbia, for example, experienced a growth revival after implementing a cap on regulatory requirements.

Other studies have confirmed the detrimental effects too much regulation can have on investment, productivity and other factors that contribute to rising wages, living standards and overall human prosperity. Perhaps worst of all, costly regulations (which are easier for affluent people to comply with) can create barriers that prevent the least fortunate among us from climbing the economic ladder. Occupational licensing regulations are just one example of hoops the government forces people to jump through just to earn a living.

It isn’t all bad news for Mississippi, however. Things could be worse. Take neighbor Arkansas, a state that doesn’t even have an official administrative code. It’s not because Arkansas has no rules — far from it. Rather, no one has bothered to compile all Arkansas’s rules in one place, making compliance all but impossible.

So what can Gov. Phil Bryant and the Legislature do to prevent Mississippians from drowning in a sea of red tape?

One model is Virginia. Last year, the state passed a law that aims to achieve a 25 percent reduction in regulatory requirements at two state agencies. By focusing on licensing and criminal justice regulation—areas where there is a broad consensus that important changes are needed—Democrats and Republicans were able to come together in a case of something that’s becoming all too rare these days: bipartisanship. Perhaps Mississippi could implement even more ambitious reforms, leading the way as a model for other states.

When regulation works well, it sets up consistent rules of the game for workers and businesses, so that there is a level playing field for everyone. But regulation can easily get out of hand. As we enter 2019, Mississippians should be thinking about what they want to accomplish in the year ahead. Regulatory reform is one New Year’s resolution worth committing to.

James Broughel is a senior research fellow with the Mercatus Center at George Mason University and author of the recent study “A Snapshot of Mississippi Regulation in 2018.”